The invention relates to methods and systems for operating exhaust oxygen sensor based on water contact at sensor. Methods and systems are provided for operating an exhaust oxygen sensor coupled to anexhaust passage of an internal combustion engine in response to detecting water at the sensor. In one example, a method may include indicating water at an exhaust oxygen sensor positioned in an engine exhaust passage based on a sensor parameter of the exhaust oxygen sensor while operating the exhaust oxygen sensor in a variable voltage (VVs) mode where a reference voltage is adjusted from a lower, first voltage to a higher, second voltage; and adjusting one or more of sensor operation and engine operation based on the indicating water.